Europe teeters on a knife edge - Physical gold demand rising
Source: Sharps Pixley , Author: Ross Norman
Posted: Fri April 27, 2012 11:22 am

INTERNATIONAL. "Speak of the devil" is a common idiom, which in full is "Speak of the devil and he doth appear".  In the same way one feels wary of commenting upon a possible economic collapse in Europe and the destruction of the Euro, for fear that it just might precipitate the event... despite the fact that we are all acutely conscious of the possibility. A case of the thought becoming mother to the deed. However, if gold is a barometer of just such an event then the temperature is nudging higher.

Gold saw tsunami's of physical gold demand in Europe in 2008 and 2010 when the availability of anything below a 400 oz gold bar (worth US$660,000) was simply not to be found for a several months.

After a quiet first quarter, there are grounds for supposing that another wave of retail investment demand for gold might be just on the horizon.

In the year that we commemorate the loss of Titanic, it is worth reflecting the crucial role of lifeboats in a crisis. Gold is a particularly small market and were you to liquidate an entire years gold mine production at current market prices, it would have a market cap of less than Vodafone - yet it is compared along with such investment mammoths as the the US dollar, the FTSE 100 and the DJIA.

Gold still represents less than one per cent of total assets under management (AUM) and to rise to the levels of the 1980's (or by 2% of global financial AUM) would require the creation of 85,000 tonnes of new investment demand or 30 years of mine production. It is still significantly under-owned.

Gold is currently in a protracted period of consolidation and expecting a break-out. Technically it is unclear which way the market could go - but fundamentally it looks likely that a sharp move to the upside is a distinctly possibility based upon rising economic tensions in Europe.

From a technical perspective, the long term gold charts seem to be saying something big is going to happen, but unable to say clearly which way. The short term patterns have been quite negative, prompting some long liquidations (what you might call a "fake-out") but there is a larger and more important chart shape emerging. The strongly bearish scenario is formed by a remarkably steady trend line back to 2008 which, if US$1613 and US$1600 were to be breached, would suggest an important shift in market behavior.

Furthermore, gold has a descending triangle which technical analyst Peter Brandt suggests would be 'resolved' by a move downwards to US$1525... a game changer. The bullish argument is that gold could be forming a massive "reverse head & shoulders pattern". The symmetry of this pattern, coupled with falling open interest, suggests a likely continuation considerably higher. A breach of US$1700 would then be confirmed by a close above US$1800 with a target to breach US$1920 (the previous all time high) topping out at US$2080.

The gold market has been characterized by flat prices and declining open interest, as speculative interest fades. Usually the gold market finds equilibrium or a "bottom" before the primary trend reasserts itself - this seems to be what is happening now.

Note: SharpsPixley.com is the the online platform for Sharps Pixley Ltd, a physical precious metals trader.

SharpsPixley.com aims to bring you the latest gold news, live gold prices and gold charts and is an online shop for buying gold bars and gold coins.

Buying gold has never been easier or more attractive and is a great investment. SharpsPixley.com will allow those interested in buying precious metals to buy gold against the live spot price of gold, and SharpsPixley.com will keep you informed of all the latest market trends using our gold news feeds, our gold charting tools, and displaying live gold prices from around the world.

This article is republished with permission from Sharps Pixley.

Click here for more information about Sharps Pixley.

© Copyright Sharps Pixley 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. 
 

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

date:Posted: April 24, 2014
UAE. As of March 2014, and including the recent issuance, we estimate the government debt stood at US$54.8 billion (55.9% of GDP), compared to US$50.5 billion (55.5% of GDP) in the same period of last year.
date:Posted: April 23, 2014
UAE. Managing an internationally mobile workforce can be challenging, particularly as home country and host country laws can be vastly different; Legal compliance with local laws may mean that it is not possible to impose global policies on the workforce.
date:Posted: April 22, 2014
UAE. "Adapt to Survive", a global study by PwC, commissioned by LinkedIn, reveals the economic impact of not having the right people in the right jobs.
INTERNATIONAL. The credit agency cut Russia's rating to BBB- from BBB, in a move that underscores risks from President Vladimir Putin's policy of intervention in Ukraine.
dhgate